Airbus CEO upbeat on EADS revamp, profit growth

By

Published December 03, 2012

| Reuters

advertisement

LONDON – The chief executive of Airbus moved to head off any concerns about a dip in profits or political interference at the European planemaker as France and Germany edged towards a shake-up of parent group EADS on Monday.

In an interview, Fabrice Bregier told Reuters he was confident that Airbus would ride out what some analysts fear could be a bumpy transitional period without either sacrificing record production or seeing its profits sag.

But he conceded Airbus was set to drop behind U.S. rival Boeing in the traditional race for orders and deliveries this year, even after grabbing almost 200 new orders in November.

"We are not in a hurry," Bregier said. "We will achieve more than our target of 650 orders this year."

He said development of the A350, the Toulouse-based company's next major project, was on track after a delay of up to six months announced earlier this year. Airbus had also come to grips with problems of wing cracks on the A380 superjumbo.

Airbus expects to meet a target of delivering 30 superjumbos in 2012 as it catches up from a slowdown caused by the flaws in several components on each wing. Next year, deliveries could slip below 30 before exceeding that level in 2014, Bregier said. Airbus is sticking to a breakeven goal for the A380 by 2015.

Bregier, a former defense executive who controlled Airbus operations for six years before becoming head of the largest EADS division in June, pledged to keep a grip on efforts to deliver the company's seven-year backlog of jets as CEO.

"If we do that, we will grow year on year," he said. "We have the potential to increase the profitability year on year for the next 4-5 years."

Some analysts have expressed concerns that a projected slew of loss-making early deliveries of A350s sold at launch prices and a potential slowdown in demand for current-generation planes could dent profits at mid-decade.

Buoyed by demand from Asia, Airbus has started producing its A320 narrowbody planes at a record 42 a month, but has found the ramp-up was "painful" for some of its suppliers, Bregier said.

It is anxious to prevent a dip in deliveries as airlines shy away from the current model to focus on the revamped A320neo, a fuel-saving model due to enter service from 2015.

Bregier said Airbus would not aim for higher production until the A320neo was at full speed from around 2018. Airbus has a "few hundred" current-type A320s left to sell in 2015/16.

The company has yet to make a decision to increase planned production for the A330, which it had said was threatened by China's refusal to confirm orders in protest at European Union airline emissions rules. The EU agreed to freeze the scheme last month.

NO INTERFERENCE

Bregier was speaking as governments fine-tuned a deal to alter the corporate structure of Europe's largest aerospace group, bringing in Germany as a direct shareholder in EADS for the first time, while reducing industrial proxy shareholdings.

"I am very optimistic that Airbus will continue to be supported and that we will have free hands to do what is necessary for Airbus's success," Bregier told Reuters.

Airbus has become steadily more integrated after starting out more than 40 years ago as a consortium of national entities. But there have been signs of renewed tensions over jobs.

Industrial and diplomatic sources say Germany is withholding part of a 1.2 billion-euro loan, designed to help Airbus build the carbon-composite A350, in a row over the allocation of work.

Germany is expected to take a 12-percent stake in EADS, matching France on the basis of voting rights.

Declining to confirm that would be the case, Bregier said: "This is subject to confirmation, but with 12 percent as a shareholder, you can influence 12 percent of the company."

He added he was confident the loan dispute with Germany would be resolved and signaled a possible shift in rhetoric in a dispute with the United States over whether such aid is legal.

Global trade rulings against aid for both Airbus and Boeing have failed to resolve the world's largest trade dispute.

Asked whether Airbus could do without such support for its next generation of aircraft, Bregier said: "Yes - if there is a level playing field, which is very difficult to obtain, because the WTO found heavy subsidies going to Boeing.

"We have China, Russia, if everybody plays the game, my answer would be yes, definitely."

Both companies have called for a level playing field throughout the marathon dispute, but Bregier appeared to open new ground by openly saying this might mean zero support.

Boeing however dismissed the comments.

"The World Trade Organisation has already ruled that all government launch aid to Airbus, totaling billions of euros, was illegal," a spokesman said. "Only when this illegal practice stops, can we discuss a level playing field."

Airbus sold 646 planes between January and November, Bregier told Reuters, just shy of a target of 650 for the year.

After adjusting for cancellations, net orders stood at 585 and deliveries at 516 in the period, leaving Airbus behind its U.S. rival for the first time in several years.

Boeing, catching up on last year's record A320neo orders with its new 737 MAX, has sold more than 1,150 aircraft.